-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QeJtu1AT59IYuDKEHeZKDgku4mluXyjqhs5Lt8Omm8y4dUOLAAckD5/c35NUhMln tff5eqac+GBoRGNLHmozWA== 0000908737-05-000168.txt : 20050310 0000908737-05-000168.hdr.sgml : 20050310 20050310113147 ACCESSION NUMBER: 0000908737-05-000168 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050310 DATE AS OF CHANGE: 20050310 EFFECTIVENESS DATE: 20050310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST INC CENTRAL INDEX KEY: 0000895415 IRS NUMBER: 521806085 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07386 FILM NUMBER: 05671191 BUSINESS ADDRESS: STREET 1: ONE LIBERTY PLAZA STREET 2: 165 BROADWAY, 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10006-1404 BUSINESS PHONE: 212-549-8400 MAIL ADDRESS: STREET 1: ONE LIBERTY PLAZA STREET 2: 165 BROADWAY, 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10006-1404 N-CSR 1 ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07386 HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. (Exact name of registrant as specified in charter) ONE LIBERTY PLAZA, 165 BROADWAY, 36TH FLOOR NEW YORK, NEW YORK 10006-1404 (Address of principal executive offices) (Zip code) CLIFFORD E. LAI, PRESIDENT HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. ONE LIBERTY PLAZA, 165 BROADWAY, 36TH FLOOR NEW YORK, NEW YORK, 10006-1404 (Name and address of agent for service) Registrant's telephone number, including area code: 1 (800) Hyperion Date of fiscal year end: December 31 Date of reporting period: December 31, 2004 Item 1. Reports to Shareholders. [GRAPHIC OMITTED] December 31, 2004 [GRAPHIC OMITTED] - ------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Portfolio Composition - ------------------------------------------------------------------------------- The chart that follows shows the allocation of the Trust's holdings by asset category as of December 31, 2004. [GRAPHIC OMITTED] * As a percentage of total investments. - ------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Report of the Investment Advisor For the Year Ended December 31, 2004 - ------------------------------------------------------------------------------- Dear Shareholder: We welcome this opportunity to provide you with information about the Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. (the "Trust") for its fiscal year ended December 31, 2004. The Trust's shares are traded on the New York Stock Exchange ("NYSE") under the symbol "HTO". For the fiscal year ended December 31, 2004, the Trust's total return, based upon the NYSE market price of the Trust's shares plus dividends and assumed reinvestment of dividends and distributions, was 3.09%. As of December 31, 2004, the Trust was being managed with an average duration of 0.5 years, as measured on a net asset basis (duration measures a bond portfolio's price sensitivity to changes in interest rates). The duration of total assets was 1.0 years -- all of this consistent with the targeted maturity of the Trust in November 2005. The Trust utilizes leverage to enhance portfolio yield and total return. As of December 31, 2004, leverage represented 15.6% of total assets. Description of the Trust The Trust is a closed-end investment company whose objectives are to provide a high level of current income consistent with investing only in investment grade securities and to attempt to return $10.00 per share (the initial public offering price per share) to investors on, or shortly before, November 30, 2005. The Trust pursues these objectives by investing in a portfolio primarily of mortgage-backed securities ("MBS"), issued or guaranteed by either the U.S. Government or one of its Agencies or instrumentalities, or rated "investment grade" by a nationally recognized rating agency (e.g., Standard & Poor's Corporation or Fitch IBCA, Inc.) at the time of the investment. No assurance can be given that the Trust's investment objectives will be achieved. Market Environment The economy picked up in the fourth quarter. Employment growth surged as measured by a sharp rise in the October Non-Farm Payroll report. The improved employment picture led to a rise in Consumer Confidence, strong Christmas sales and higher corporate profits. Continued low, longer-term fixed mortgage rates kept home sales strong, but car sales tapered. The spike in oil prices peaked in late October and is now no longer viewed as a restraint on further economic expansion. The rise in consumer spending continued to exacerbate the trade deficit. Fiscal policies, including funding the Iraqi war effort drove the capital budget further into deficit. While the latter resulted in an increase in Treasury issuance, the primary impact on the markets was a continuation of the four-year decline in the US dollar. The more robust economic outlook, the decline in the US dollar, and the relief from lower oil prices, all allowed the Fed to continue to raise Fed Funds at the "moderate" pace that they first outlined during the summer. The Fed raised interest rates by 25 basis points at both the November 10 and December 14 meeting, and they have made clear their intention to raise them another 25 basis points in February. Our long-term concern about the markets is the twin budget and trade deficits, which are both growing to record levels. While this may lead to longer-term, higher interest rates as the government finances the deficit, it is immediately resulting in a weaker US dollar, as non-US investors, who generally buy a large portion of Treasuries, demand higher interest rates. Our view is that the US dollar will weaken further through the middle of 2005. This will have at least two immediate impacts on sectors to which the funds have exposure. First, a weaker US dollar will lead to a rise in the cost of imported goods. This may decrease consumer spending (with corporate profit implications) and may impact the level of retail sales, which is of issue to our CMBS positions. Second, a further weakening of the US dollar will result in commercial office space being even more attractive to the European investors that invest so much in that sector. Generally, we believe that short term interest rates will continue to rise with Fed Funds reaching 3% during 2005, however, longer term interest rates may very well stabilize around current levels. Portfolio Strategy With a targeted maturity date of November 2005, the portfolio's duration was 0.56 years, 0.43 years shorter than that of the November 2005 Treasury. The duration of the portfolio will continue to shorten as time passes and the maturity date of the fund approaches. Over the last several months, the yield curve continues to flatten, and we continue to expect this trend to continue as the Federal Open Market Committee ("FOMC") continues to raise the short term cost of funds. Over the past six months, we continue to prepare the Trust for the November 2005 termination date while reducing risk. Over the period, we purchased two residential Mortgage-Backed Securities ("MBS") securities backed by hybrid Adjustable Rate Mortgages ("ARMs"). Going forward, we will continue to replace the portfolio run-off with short duration asset-backed securities and Agency and non-Agency Collateralized Mortgage Obligations ("CMOs"). Conclusion We appreciate the opportunity to serve your investment needs, and thank you for your continued support. As always, we welcome your questions and comments, and encourage you to contact our Shareholder Services representatives at 1-800-HYPERION. Sincerely, [GRAPHIC OMITTED] CLIFFORD E. LAI President, Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. President & Chief Executive Officer, Hyperion Capital Management, Inc. [GRAPHIC OMITTED] JOHN H. DOLAN Senior Portfolio Manager, Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. Managing Director & Chief Investment Officer, Hyperion Capital Management, Inc.
- ---------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Portfolio of Investments December 31, 2004 Principal Interest Amount Value Rate Maturity (000s) (Note 2) - --------------------------------------------------------------------------- ------------------------------------------ U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 50.0% U.S. Government Agency Collateralized Mortgage Obligations -- 11.8% Federal Home Loan Mortgage Corporation Series 2731, Class CA..................................... 3.50% 07/15/13 $ 6,870@ $ 6,871.381 Series 2551, Class TB..................................... 4.50 09/15/21 3,000 3,009,351 Series 2773, Class EA..................................... 4.50 05/15/10 9,672 9,801,591 --------------- Total U.S. Government Agency Collateralized Mortgage Obligations (Cost - $19,843,230)................................. 19,682,323 --------------- U.S. Government Agency Pass -- Through Certificates -- 38.2% Federal Home Loan Mortgage Corporation Pool C63650.............................................. 7.00 02/01/32 1,110 1,183,631 Pool C63689.............................................. 7.00 02/01/32 108 114,840 Pool C63740.............................................. 7.00 02/01/32 1,606 1,702,363 Pool C63963.............................................. 7.00 02/01/32 783 829,750 Pool C64107.............................................. 7.00 02/01/32 431 456,888 Pool C64108.............................................. 7.00 02/01/32 1,269 1,344,847 --------------- 5,632,319 --------------- Federal National Mortgage Association Pool 744642.............................................. 3.10+ 10/01/33 2,663 2,655,473 TBA...................................................... 6.50 TBA 14,000 14,675,937 TBA...................................................... 7.00 TBA 26,000 27,539,694 Pool 614372.............................................. 7.00 01/01/32 1,053 1,116,803 Pool 619134.............................................. 7.00 01/01/32 148 156,833 Pool 628305.............................................. 7.00 03/01/32 2,547 2,699,514 Pool 682408.............................................. 7.00 03/01/32 1,474 1,562,029 Pool 630249.............................................. 7.00 03/01/32 419 443,941 Pool 642487.............................................. 7.00 04/01/32 325 344,375 Pool 645465.............................................. 7.00 05/01/32 3,749 1,974,062 --------------- 53,168,661 --------------- Government National Mortgage Association Pool 581513.............................................. 6.00 04/15/33 1,192 1,236,165 Pool 569691.............................................. 7.50 02/15/32 1,495 605,821 --------------- 2,841,986 --------------- Total U.S. Government Agency Pass - Through Certificates (Cost -- $63,300,164)................................. 63,642,966 --------------- Total U.S. Government & Agency Obligations (Cost -- $83,143,394)................................. 83,325,289 --------------- - --------------------------------------------------------------------------------------------------------------------- ASSET-BACKED SECURITIES -- 10.6% Housing Related Asset-Backed Securities -- 10.6% Aames Mortgage Trust Series 2003-1N, Class A*................................. 7.50 10/27/33 261 260,201 Aegis Asset Backed Securities Trust Series 2004-2N, Class N1*................................ 4.50 04/25/34 561 557,788 Amortizing Residential Collateral Trust Series 2002-BC10, Class M2(d)............................ 4.92+ 01/25/33 5,000 5,081,380 AQ Finance NIM Trust Series 2003-N3A, Class Note*............................. 9.05 03/25/33 17 16,544 Argent NIM Trust Series 2003-N6, Class A*................................. 6.40% 03/25/34 146 145,928 First Franklin Mortgage Loan Asset-Backed Certificate Series 2003-FF1, Class M3F(c)............................ 5.59/5.64 03/25/33 $ 2,200 $ 2,200,541 Fremont NIM Trust - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Portfolio of Investments December 31, 2004 Principal Interest Amount Value Rate Maturity (000s) (Note 2) - --------------------------------------------------------------------------- ----------------------------------------- ASSET-BACKED SECURITIES (continued) Series 2004-A, Class Note*............................... 4.75 01/25/34 471 469,412 Renaissance NIM Trust Series 2003-A, Class Note*............................... 8.60 06/25/33 11 10,993 Sail Net Interest Margin Notes Series 2004-2A, Class A*................................. 5.50 03/27/34 714 711,501 Saxon Asset Securities Trust Series 1999-3, Class MF1(c).............................. 7.74/8.25 12/25/29 8,153 8,268,588 --------------- Total Housing Related Asset-Backed Securities (Cost - $17,672,628)................................. 17,722,876 --------------- Total Asset-Backed Securities (Cost - $17,672,628)................................. 17,722,876 --------------- - --------------------------------------------------------------------------------------------------------------------- MUNICIPAL ZERO COUPON SECURITIES - 6.5% Texas - 5.7% San Antonio Texas, Electricity & Gas Revenue Bond, Series B, FGIC..................................... 2.41(a) 02/01/07 10,000 9,488,500 --------------- West Virginia - 0.8% West Virginia State Parkways Economic Development and Tourism Authority Revenue Bond, FGIC Capital Appreciation Unrefunded................................. 2.08(a) 05/15/05 1,280 1,270,413 --------------- Total Municipal Zero Coupon Securities (Cost - $10,134,053)................................. 10,758,913 --------------- - --------------------------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES - 18.0% 1301 Avenue of the Americas Trust Series 2000-1301, Class B*............................... 7.58+ 08/03/10 8,000 8,194,880 Morgan Stanley Capital I Series 1999-1NYP, Class A2*.............................. 6.84 05/03/30 16,000 16,620,640 Trizechahn Office Properties Trust Series 2001-TZHAC, Class C3*............................. 6.52 03/15/13 5,000 5,270,000 --------------- Total Commercial Mortgage Backed Securities (Cost - $30,290,742)................................. 30,085,520 --------------- - --------------------------------------------------------------------------------------------------------------------- NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES - 34.8% Subordinated Collateralized Mortgage Obligations -- 7.0% Bank of America Mortgage Securities, Inc. Series 2003-B, Class B2.................................. 4.14+ 03/25/33 3,641 3,565,796 Citicorp Mortgage Securities, Inc. Series 1999-8, Class B2.................................. 6.25 10/25/29 470 475,455 First Horizon Asset Securities, Inc. Series 2003-AR2, Class B3................................ 4.79%+ 07/25/33 949 924,205 Series 2002-AR2, Class B2................................ 5.28+ 12/27/32 793 808,615 --------------- 1,732,820 --------------- - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Portfolio of Investments December 31, 2004 Principal Interest Amount Value Rate Maturity (000s) (Note 2) - --------------------------------------------------------------------------------------------------------------------- NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES - 34.8% (continued) Merrill Lynch Mortgage Investors, Inc. Series 2002-A3, Class M3................................. 5.56+ 09/25/32 1,849 1,873,938 Residential Funding Mortgage Securities I Series 2002-S9, Class M1................................. 6.00 07/25/17 1,188 1,194,497 Washington Mutual Series 2002-AR18, Class B3............................... 4.80+ 01/25/33 2,873 2,854,969 --------------- Total Subordinated Collateralized Mortgage Obligations (Cost - $11,644,765)................................. 11,697,475 --------------- Senior Collateralized Mortgage Backed Securities - 27.8% ABN AMRO Mortgage Corp. Series 2002-1A, Class 2A3................................ 5.35+ 06/25/32 349 350,594 Bank of America Mortgage Securities, Inc. Series 2003-1, Class 1Al................................. 3.31+ 10/25/33 3,301 3,323,590 Countrywide Home Loans Series 2002-32, Class 2A3................................ 5.00 01/25/18 962 976,991 Credit Suisse First Boston Mortgage Securities Corp. Series 2003-AR9, Class 1Al............................... 4.94+ 03/25/33 2,504 2,512,581 Morgan Stanley Mortgage Loan Trust Series 2004-8AR, Class 4A3............................... 5.46+ 10/25/34 4,670 4,720,095 PNC Mortgage Securities Corp. Series 1999-4, Class 1A7................................. 6.40 06/25/29 277 278,116 Washington Mutual Series 2004-AR4, Class A2................................ 2.98+ 06/25/34 6,000 5,941,074 Series 2003-AR12, Class A3............................... 3.36+ 02/25/34 5,000 4,991,140 Series 2004-AR9, Class A3................................ 3.43+ 08/25/34 6,500 6,471,231 Series 2003-AR10, Class A3A.............................. 3.53+ 10/25/33 5,000 4,978,495 --------------- 22,381,940 --------------- Wells Fargo Mortgage Backed Securities Trust Series 2004-N, Class Al.................................. 2.55+ 08/25/34 4,676 4,600,308 Series 2004-X, Class 1A4................................. 5.00+ 11/25/34 7,282 7,279,729 --------------- 11,880,037 --------------- Total Senior Collateralized Mortgage Backed Securities (Cost - $46,743,457)................................. 46,423,944 --------------- Total Non-Agency Residential Mortgage Backed Securities (Cost - $58,388,222)................................. 58,121,419 --------------- - --------------------------------------------------------------------------------------------------------------------- INTEREST ONLY SECURITIES -- 0.0% DLJ Mortgage Acceptance Corp. Series 1997-CF2, Class CP*(b) (Cost - $0).......................................... 0.00% 10/15/30 $ 125,000 $ 1,250 --------------- - --------------------------------------------------------------------------------------------------------------------- Principal Amount (000s) SHORT TERM INVESTMENTS -- 6.6% Short Term Investments -- 6.6% Federal National Mortgage Association Discount Note (Cost - $10,998,643)................................. 1.03(a) 01/03/05 11,000 10,998,643 --------------- - --------------------------------------------------------------------------------------------------------------------- Total Investments - 126.5% (Cost - $210,627,682)................................ 211,013,910 Liabilities in Excess of Other Assets - (26.5)%........... (44,157,206) --------------- NET ASSETS - 100.0%........................................ $ 166,856,704 =============== - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Portfolio of Investments December 31, 2004 Principal Interest Amount Value Rate Maturity (000s) (Note 2) - --------------------------------------------------------------------------------------------------------------------- + -- Variable Rate Security -- Interest rate is the rate in effect December 31, 2004. @ -- Portion or entire principal amount is held as collateral for interest rate swap agreements (Note 7). * -- Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. (a) -- Zero Coupon Note -- Interest rate represents current yield to maturity. (b) -- Security is no longer making interest payments, to be redeemed at zero percent. (c) -- Security is a "step up" bond where coupon increases or steps up at a predetermined date. Rates shown are current coupon and next coupon rate when security steps up. (d) -- Security is a "step up" bond where coupon increases or steps up at a predetermined date. At that date these coupons increase to LIBOR plus a predetermined margin. FGIC -- Insured by Financial Guaranty Insurance Company. TBA -- Settlement is on a delayed delivery or when-issued basis with a final maturity to be announced (TBA) in the future. - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Statement of Assets and Liabilities December 31, 2004 - --------------------------------------------------------------------------------------------------------------------- Assets: Investments, at value (cost $210,627,682) (Note 2)............................................. $ 211,013,910 Cash........................................................................................... 484,586 Principal paydowns receivable.................................................................. 7,949 Interest receivable............................................................................ 657,950 ----------------- Total assets............................................................................... 212,164,395 ----------------- Liabilities: Payable for investments purchased.............................................................. 42,356,313 Unrealized depreciation on swap contracts (Note 7)............................................. 2,532,692 Investment advisory fee payable (Note 3)....................................................... 91,848 Administration fee payable (Note 3)............................................................ 23,288 Accrued expenses and other liabilities......................................................... 303,550 ----------------- Total liabilities.......................................................................... 45,307,691 ----------------- Net Assets (equivalent to $9.82 per share based on 16,993,933 shares issued and outstanding)... $ 166,856,704 ================= Composition of Net Assets: Capital stock, at par value ($.001) (Note 6)................................................... $ 16,994 Additional paid-in capital (Note 6)............................................................ 167,885,220 Accumulated undistributed net investment income................................................ 2,805,518 Accumulated net realized loss.................................................................. (1,704,566) Net unrealized depreciation.................................................................... (2,146,462) ----------------- Net assets applicable to capital stock outstanding............................................. $ 166,856,704 ================= - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Statement of Operations For the Year Ended December 31, 2004 - --------------------------------------------------------------------------------------------------------------------- Investment Income (Note 2): Interest..................................................................................... $ 6,882,237 ----------------- Expenses: Investment advisory fee (Note 3)............................................................. 1,082,433 Administration fee (Note 3).................................................................. 269,079 Insurance.................................................................................... 145,352 Custodian.................................................................................... 64,733 Reports to shareholders...................................................................... 69,859 Auditing and tax services.................................................................... 99,150 Transfer agency.............................................................................. 22,247 Directors' fees.............................................................................. 64,922 Legal........................................................................................ 23,830 Registration fees............................................................................ 23,751 Liquidation expense.......................................................................... 215,295 Miscellaneous................................................................................ 32,344 ----------------- Total operating expenses................................................................... 2,112,995 Interest expense on reverse repurchase agreements (Note 5)............................... 48,237 ----------------- Total expenses............................................................................. 2,161,232 ----------------- Net investment income........................................................................ 4,721,005 ----------------- Realized and Unrealized Gain (Loss) on Investments (Notes 2 and 7): Net realized gain/(loss) on: Investment transactions...................................................................... 2,169,586 Swap contracts............................................................................... (1,722,871) ----------------- Net realized gain on investment transactions and swap contracts................................ 446,715 ----------------- Net change in unrealized appreciation/depreciation on: Investments.................................................................................. (3,267,584) Swap contracts............................................................................... 1,410,372 ----------------- Net change in unrealized appreciation/depreciation on investments and swap contracts........... (1,848,212) ----------------- Net realized and unrealized loss on investments and swap contracts............................. (1,401,497) ----------------- Net increase in net assets resulting from operations........................................... $ 3,319,508 ================= - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Statements of Changes in Net Assets For the Year For the Year Ended Ended December 31, 2004 December 31, 2003 - --------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Resulting from Operations: Net investment income................................................... $ 4,721,005 $ 7,978,208 Net realized gain on investment transactions and swap contracts......... 446,715 1,439,892 Net change in unrealized appreciation/depreciation on investments and swap contracts......................................................... (1,848,212) (4,520,717) ---------------- ----------------- Net increase in net assets resulting from operations.................... 3,319,508 4,897,383 ---------------- ----------------- Dividends to Shareholders (Note 2): Net investment income................................................... (2,803,999) (5,805,644) ---------------- ----------------- Capital Stock Transactions (Note 6): Net asset value of shares issued through dividend reinvestment (6,358 shares)......................................................... -- 62,229 ----------------- ----------------- Total increase (decrease) in net assets............................... 515,509 (846,032) Net Assets: Beginning of year....................................................... 166,341,195 167,187,227 ---------------- ----------------- End of year (including undistributed net investment income of $2,805,518 and $2,644,256, respectively).......................................... $ 166,856,704 $ 166,341,195 ================ ================= - --------------- See notes to financial statements. - --------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Statement of Cash Flows For the Year Ended December 31, 2004 - --------------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Cash: Cash flows provided by (used for) operating activities: Net increase in net assets resulting from operations........................................ $ 3,319,508 Adjustments to reconcile net increase in net assets from operations to net cash provided by operating activities: Purchases of long-term portfolio investments............................................... (649,701,356) Proceeds from disposition of long-term portfolio investments and principal paydowns........ 678,295,935 Sales of short-term portfolio investments, net............................................. (10,994,912) Decrease in interest receivable............................................................ 372,035 Decrease in receivable for investments sold and paydowns................................... 18,356,612 Decrease in prepaid expenses and other assets.............................................. 761 Decrease in interest payable for reverse repurchase agreements............................. (134) Decrease in payable for investments purchased.............................................. (36,521,401) Increase in investment advisory fee payable................................................ 493 Increase in administration fee payable..................................................... 785 Increase in accrued expenses and other liabilities......................................... 203,835 Net amortization on investments............................................................ 1,520,403 Unrealized appreciation on investments..................................................... 1,848,212 Net realized gain on investment transactions............................................... (2,169,586) ----------------- Net cash provided by operating activities................................................... 4,531,191 ----------------- Cash flows used for financing activities: Repayment of reverse repurchase agreements, net............................................. (2,073,000) Dividends paid to shareholders.............................................................. (2,803,999) ----------------- Net cash used for financing activities...................................................... (4,876,999) ----------------- Net decrease in cash.......................................................................... (345,808) Cash at beginning of year..................................................................... 830,394 ----------------- Cash at end of year........................................................................... $ 484,586 ================= Interest payments for the year ended December 31, 2004, totaled $48,371. - --------------- * The format of the statement of cash flows has changed from the direct method to the indirect method. - --------------- See notes to financial statements. - ---------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Financial Highlights For the Year Ended December 31, ---------------------------------------------------------------- 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period................ $ 9.79 $ 9.84 $ 9.92 $ 9.69 $ 9.04 --------- --------- --------- --------- ---------- Net investment income............................... 0.28 0.47 0.62 0.63 0.51 Net realized and unrealized gains (losses) on investments, short sales, futures transactions and swap contracts.................................. (0.08) (0.18) (0.17) 0.15 0.55 --------- --------- --------- --------- ---------- Net increase in net asset value resulting from 0.20 0.29 0.45 0.78 1.06 operations........................................ Net effect of shares repurchased.................... -- -- -- -- 0.00** Dividends from net investment income................ (0.17) (0.34) (0.53) (0.55) (0.41) ----- --------- --------- --------- ---------- Net asset value, end of year........................ $ 9.82 $ 9.79 $ 9.84 $ 9.92 $ 9.69 ========= ========= ========= ========= ========== Market price, end of year........................... $ 9.7300 $ 9.6000 $ 9.8900 $ 9.6500 $ 8.6875 ========== ========== ========= ========== =========== Total Investment Return+............................ 3.09% 0.55% 8.20% 17.87% 15.14% Ratios to Average Net Assets/Supplementary Data: Net assets, end of period (000's)................... $.166,857 $ 166,341 $ 167,187 $ 168,474 $ 164,570 Operating expenses.................................. 1.27% 1.13% 1.09% 1.05% 1.08% Interest expense.................................... 0.03% 0.32% 0.82% 1.83% 3.08% Total expenses.................................... 1.30% 1.45% 1.91% 2.88% 4.16% Net investment income............................... 2.83% 4.81% 6.12% 6.27% 5.62% Portfolio turnover rate............................. 299% 173% 92% 112% 12% - ---------- + Total investment return is based upon the New York Stock Exchange market price of the Trust's shares and excludes the effects of brokerage commissions. Dividends and distributions are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. ** Rounds to less than $0.01. - --------------- See notes to financial statements.
- ------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Notes to Financial Statements December 31, 2004 - ------------------------------------------------------------------------------- 1. The Trust Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. (the "Trust"), which was incorporated under the laws of the State of Maryland on December 14, 1992, is registered under the Investment Company Act of 1940 (the "1940 Act") as a diversified, closed-end management investment company. The Trust had no transactions until February 17, 1993, when it sold 10,673 shares of common stock for $100,006 to Hyperion Capital Management, Inc. (the "Advisor"). The Trust expects to distribute substantially all of its net assets on or shortly after November 30, 2005 and thereafter to terminate. The Trust's investment objectives are to provide a high level of current income consistent with investing only in investment grade securities and to return at least $10.00 per share (the initial public offering price per share) to investors on or shortly before November 30, 2005. Investment grade securities are securities that are either (i) at the time of investment rated in one of the four highest rating categories of a nationally recognized rating agency (e.g., between AAA and BBB by Standard & Poor's Corporation and Fitch IBCA, Inc. or between Aaa and Baa by Moody's Investors Service, Inc.) or (ii) issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities. No assurance can be given that the Trust's investment objectives will be achieved. 2. Significant Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Valuation of Investments: Where market quotations are readily available, securities held by the Trust are valued based upon the current bid price, except preferred stocks, which are valued based upon the closing price. Securities maybe valued by independent pricing services that have been approved by the Board of Directors. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. The Trust values mortgage-backed securities ("MBS") and other debt securities for which market quotations are not readily available (approximately 15% of the investments in securities held by the Trust at December 31, 2004) at their fair value as determined in good faith, utilizing procedures approved by the Board of Directors of the Trust, on the basis of information provided by dealers in such securities. Some of the general factors which may be considered in determining fair value include the fundamental analytic data relating to the investment and an evaluation of the forces which influence the market in which these securities are purchased and sold. Determination of fair value involves subjective judgment, as the actual market value of a particular security can be established only by negotiations between the parties in a sales transaction. Debt securities having a remaining maturity of sixty days or less when purchased and debt securities originally purchased with maturities in excess of sixty days but which currently have maturities of sixty days or less are valued at amortized cost. The ability of issuers of debt securities held by the Trust to meet their obligations may be affected by economic developments in a specific industry or region. The values of MBS can be significantly affected by changes in interest rates or in the financial condition of the issuer. Options Written or Purchased: The Trust may write or purchase options as a method of hedging potential declines in similar underlying securities. When the Trust writes or purchases an option, an amount equal to the premium received or paid by the Trust is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, also is treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the proceeds from the sale or cost of the purchase in determining whether the Trust has realized a gain or a loss on the investment transaction. The Trust, as writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option. The Trust purchases or writes options to hedge against adverse market movements or fluctuations in value caused by changes in interest rates. The Trust bears the risk in purchasing an option, to the extent of the premium paid, that it will expire without being exercised. If this occurs, the option expires worthless and the premium paid for the option is recognized as a realized loss. The risk associated with writing call options is that the Trust may forego the opportunity for a profit if the market value of the underlying position increases and the option is exercised. The Trust will only write call options on positions held in its portfolio. The risk in writing a put option is that the Trust may incur a loss if the market value of the underlying position decreases and the option is exercised. In addition, the Trust bears the risk of not being able to enter into a closing transaction for written options as a result of an illiquid market. Short Sales: The Trust may make short sales of securities as a method of hedging potential declines in similar securities owned. The Trust may have to pay a fee to borrow the particular securities and may be obligated to pay to the lender an amount equal to any payments received on such borrowed securities. A gain, limited to the amount at which the Trust sold the security short, or a loss, unlimited as to dollar amount, will be realized upon the termination of a short sale if the market price is less or greater than the proceeds originally received. Financial Futures Contracts: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Trust records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trust's basis in the contract. The Trust invests in financial futures contracts to hedge against fluctuations in the value of portfolio securities caused by changes in prevailing market interest rates. Should interest rates move unexpectedly, the Trust may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. The Trust is at risk that it may not be able to close out a transaction because of an illiquid market. Swap Agreements: The Trust may enter into interest rate swap agreements to manage its exposure to interest rates. Interest rate swap agreements involve the exchange by the Trust with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. The Trust will usually enter into interest rate swaps on a net basis, i.e., the two payment streams are netted out, with the Trust receiving or paying, as the case may be, only the net amount of the two payments. Swaps are marked to market daily based upon a quotation from the market maker (which is typically the counterparty to the swap agreement) and the change, if any, along with an accrual for periodic payments due or owed is recorded as unrealized gain or loss in the Statement of Operations. Net cash payments of interest rate swap agreements are included as part of realized gain/loss in the Statement of Operations. Entering into these agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or that there may be unfavorable changes in the fluctuation of interest rates. See Note 7 for a summary of all open swap agreements as of December 31, 2004. When-Issued Purchases and Forward Commitments: The Trust may purchase securities on a "when-issued" basis and may purchase or sell securities on a "forward commitment" basis in order to hedge against anticipated changes in interest rates and prices and secure a favorable rate of return. When such transactions are negotiated, the price, which is generally expressed in yield terms, is fixed at the time the commitment is made, but delivery and payment for the securities take place at a later date, which can be a month or more after the date of the transaction. At the time the Trust makes the commitment to purchase securities on a when-issued or forward commitment basis, it will record the transaction and thereafter reflect the value of such securities in determining its net asset value. At the time the Trust enters into a transaction on a when-issued or forward commitment basis, the Advisor will identify collateral consisting of cash or liquid securities equal to the value of the when-issued or forward commitment securities and will monitor the adequacy of such collateral on a daily basis. On the delivery date, the Trust will meet its obligations from securities that are then maturing or sales of the securities identified as collateral by the Advisor and/or from then available cash flow. When-issued securities and forward commitments may be sold prior to the settlement date. If the Trust disposes of the right to acquire a when-issued security prior to its acquisition or disposes of its right to deliver or receive against a forward commitment, it can incur a gain or loss due to market fluctuation. There is always a risk that the securities may not be delivered and that the Trust may incur a loss. Settlements in the ordinary course are not treated by the Trust as when-issued or forward commitment transactions and, accordingly, are not subject to the foregoing limitations even though some of the risks described above may be present in such transactions. Securities Transactions and Investment Income: Securities transactions are recorded on the trade date. Realized gains and losses from securities transactions are calculated on the identified cost basis. Interest income is recorded on the accrual basis. Discounts and premiums on securities are accreted and amortized using the effective yield to maturity method. Taxes: It is the Trust's intention to continue to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income or excise tax provision is required. Dividends and Distributions: The Trust declares and pays dividends monthly from net investment income. Distributions of realized capital gains in excess of capital loss carryforwards are distributed at least annually. Dividends and distributions are recorded on the ex-dividend date. Dividends from net investment income and distributions from realized gains from investment transactions have been determined in accordance with Federal income tax regulations and may differ from net investment income and realized gains recorded by the Trust for financial reporting purposes. These differences, which could be temporary or permanent in nature, may result in reclassification of distributions; however, net investment income, net realized gains and net assets are not affected. Cash Flow Information: The Trust invests in securities and distributes dividends and distributions which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets. Additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Cash, as used in the Statement of Cash Flows, is defined as "Cash" in the Statement of Assets and Liabilities, and does not include short-term investments. Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and accreting discounts and amortizing premiums on debt obligations. Repurchase Agreements: The Trust, through its custodian, receives delivery of the underlying collateral, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The Advisor is responsible for determining that the value of these underlying securities is sufficient at all times. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings commence with respect to the seller of the security, realization of the collateral by the Trust may be delayed or limited. 3. Investment Advisory Agreements and Affiliated Transactions The Trust has entered into an Investment Advisory Agreement with the Advisor. The Advisor is responsible for the management of the Trust's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Trust. For such services, the Trust pays a monthly fee at an annual rate of 0.65% of the Trust's average weekly net assets. During the year ended December 31, 2004, the Advisor earned $1,082,433 in advisory fees. The Trust has entered into an Administration Agreement with Hyperion Capital Management, Inc. (the "Administrator"). The Administrator entered into a sub-administration agreement with State Street Bank and Trust Company. (the "Sub-Administrator") The Administrator and Sub-Administrator perform administrative services necessary for the operation of the Trust, including maintaining certain books and records of the Trust and preparing reports and other documents required by federal, state, and other applicable laws and regulations, and providing the Trust with administrative office facilities. For these services, the Trust pays to the Administrator a monthly fee at an annual rate of 0.17% of the first $100 million of the Trust's average weekly net assets, 0.145% of the next $150 million and 0.12% of any amounts above $250 million. During the year ended December 31, 2004, the Administrator earned $269,079 in administration fees. The Administrator is responsible for any fees due the Sub-Administrator. Certain officers and/or directors of the Trust are officers and/or directors of the Advisor and/or the Administrator. 4. Purchases and Sales of Investments Purchases and sales of investments, excluding short-term securities, U.S. Government securities and reverse repurchase agreements, for the year ended December 31, 2004 were $61,872,748 and $61,943,859, respectively. Purchases and sales of U.S. Government securities, excluding short-term securities, for the year ended December 31, 2004 were $587,828,608 and $615,637,646, respectively. For purposes of this footnote, U.S. Government securities include securities issued by the U.S. Treasury, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association and the Federal National Mortgage Association. 5. Borrowings The Trust may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Trust sells securities and agrees to repurchase them at a mutually agreed upon date and price. Under the 1940 Act, reverse repurchase agreements will be regarded as a form of borrowing by the Trust unless, at the time it enters into a reverse repurchase agreement, it establishes and maintains a segregated account with its custodian containing securities from its portfolio having a value not less than the repurchase price (including accrued interest). The Trust has established and maintained such an account for each of its reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Trust may decline below the price of the securities the Trust has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Trust's obligation to repurchase the securities, and the Trust's use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. At December 31, 2004, the Trust had no reverse repurchase agreements outstanding. The average daily balance of reverse repurchase agreements outstanding during the year ended December 31, 2004 was approximately $4,397,188 at a weighted average interest rate of 1.10%. The maximum amount of reverse repurchase agreements outstanding at any time during the period was $15,637,709, as of July 26, 2004, which was 7.20% of total assets. 6. Capital Stock There are 75 million shares of $0.001 par value common stock authorized. Of the 16,993,933 shares outstanding at December 31, 2004 the Advisor owned 10,673 shares. The Trust is continuing its stock repurchase program, whereby an amount of up to 30% of the outstanding common stock as of March 1998, or approximately 4.8 million shares, are authorized for repurchase. The purchase price may not exceed the then-current net asset value. For the years ended December 31, 2004 and December 31, 2003 no shares were repurchased. All shares repurchased have been, or will be, retired. Since the inception of the stock repurchase program 4,723,100 shares have been repurchased pursuant to this program at a cost of $37,671,129 and an average discount of 13.16% from its net asset value. 7. Financial Instruments The Trust regularly trades in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, swap agreements and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. The notional or contractual amounts of these instruments represent the investment the Trust has in particular classes of financial instruments and does not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. During the period the Trust had segregated sufficient cash and/or securities to cover any commitments under these contracts. There were no written option or futures contracts activity for the year ended December 31, 2004. As of December 31, 2004, the following swap agreements were outstanding:
Expiration Net Unrealized Notional Amount Date Description Depreciation - ------------------ ---------- --------------------------------------------------------------------------------- $ 10,000,000 3/12/07 Agreement with Goldman Sachs Capital Markets, LP, dated 3/08/02 $ (533,182) to pay semi-annually the notional amount multiplied by 5.31% and to receive quarterly the notional amount multiplied by 3 month USD- LIBOR-BBA $ 15,000,000 2/28/09 Agreement with Goldman Sachs Capital Markets, LP, dated 2/26/02 (1,051,872) to pay semi-annually the notional amount multiplied by 5.304% and to receive quarterly the notional amount multiplied by 3 month USD-LIBOR-BBA $ 20,000,000 2/01/07 Agreement with Goldman Sachs Capital Markets, LP, dated 1/30/02 (947,638) to pay semi-annually the notional amount multiplied by 4.973% and to receive quarterly the notional amount multiplied by 3 --------------- month USD-LIBOR-BBA $ (2,532,692) ===============
8. Federal Income Tax Information Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. During the year ended December 31, 2004, the tax character of the $2,803,999 of distributions paid was from ordinary income. During the year ended December 31, 2003, the tax character of the $5,805,644 of distributions paid was from ordinary income. At December 31, 2004, the components of net assets (excluding paid-in-capital) on a tax basis were as follows: Undistributed Tax Ordinary Income............................ $ 2,088,462 ============== Accumulated capital loss..................................... $ (1,704,566) ============== Book unrealized appreciation/(depreciation).................. $ (2,146,462) Minus: Cumulative Timing Differences......................... (717,056) -------------- Unrealized appreciation/(depreciation)....................... $ (1,429,406) ============== The difference between book basis and tax basis undistributed income and book basis and tax basis unrealized appreciation/depreciation is due to the differing treatment of investments in swap contracts. Federal Income Tax Basis: The federal income tax basis of the Trust's investments at December 31, 2004 was $210,627,682. Net unrealized appreciation was $386,228 (gross unrealized appreciation -- $1,243,781; gross unrealized depreciation -- $857,553). During the year ended December 31, 2004, the Trust utilized available capital loss carryforwards amounting to $1,399,073. At December 31, 2004, the Trust had a remaining capital loss carryforward of $1,704,566, which expires in 2010, available to offset future capital gains, to the extent provided by regulations. However, if the Trust is terminated as expected in 2005, the capital loss carryforward must be utilized by 2005 in order for shareholders to realize a benefit. Capital Account Reclassification: For the year ended December 31, 2004, the Trust's undistributed net investment income was reduced by $1,755,744 and accumulated net realized loss increased by $1,343,593, with a net offsetting increase to paid-in capital of $412,151. These adjustments were primarily the result of current year paydown reclassifications, retained tax-exempt income and the reclassifications of payments related to swaps. 9. Subsequent Events Dividend: On January 7, 2005, the Trust's Board of Directors declared the following regular monthly dividend: Dividend Record Payable Per Share Date Date ------ ------ ------ $0.010 01/18/05 01/27/05 Acquisition Agreement: On February 11, 2005, all shareholders of HCM Holdings, Inc., the parent company of the Advisor, entered into a stock purchase agreement to sell all of their interests to Brascan Financial (U.S.) Corporation, which is a wholly owned subsidiary of Brascan Corporation. This transaction is expected to close by April 30, 2005, subject to certain conditions. It is expected that the Advisor will continue to provide advisory services to the Fund. 10. Contractual Obligations The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. - ------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Report of Independent Registered Public Accounting Firm December 31, 2004 - ------------------------------------------------------------------------------- To the Board of Directors and Shareholders of Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations, of cash flows and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. (the "Trust") at December 31, 2004, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Trust's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. As further described in note 1, the Trust expects to distribute substantially all of its net assets on or shortly after November 30, 2005 and terminate thereafter. PricewaterhouseCoopers LLP New York, N.Y. February 22, 2005 - ------------------------------------------------------------------------------- TAX INFORMATION (Unaudited) - ------------------------------------------------------------------------------- The Trust is required by subchapter M of the Internal Revenue Code of 1986, as amended, to advise you within 60 days of the Trust's fiscal year end (December 31, 2004) as to the federal tax status of distributions received by shareholders during such fiscal year. Accordingly, we are advising you that all distributions paid during the fiscal year were derived from net investment income and are taxable as ordinary income. None of the Trust's distributions during the fiscal year ended December 31, 2004 were earned from U.S. Treasury obligations. None of the Trust's distributions qualify for the dividends received deduction available to corporate shareholders. A notification sent to shareholders with respect to calendar 2004, which reflected the amounts to be used by calendar year taxpayers on their federal, state and local income tax returns, was made in conjunction with Form 1099-DIV and was mailed in January 2005. Shareholders are advised to consult their own tax advisors with respect to the tax consequences of their investment in the Trust.
- ------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Information Concerning Directors and Officers (Unaudited) - ------------------------------------------------------------------------------------------------------------------- The following tables provide information concerning the directors and officers of The Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. (the "Trust"). Position(s) Held with Number of Trust and Term of Portfolios in Name, Address Office and Length of Principal Occupation(s) During Past 5 Trust and Age Time Served Years and Other Directorships Held by Complex Overseen Director by Director - ------------------------------------------------------------------------------------------------------------------- Disinterested Director Class I Director to serve until Termination of the Trust: Rodman L. Drake Chairman Elected Chairman (since 2003) and Director 3 c/o One Liberty Plaza, December 9, 2003 and/or Trustee of several investment 165 Broadway 36th Floor, companies advised by Hyperion Capital New York, New York Director, Member of Management, Inc. (the `Advisor') 10006-1404 the Audit Committee, (1989- Present); Co-founder, Baringo Chairman of Capital LLC (2002- Present); Director, Age 61 Nominating and Jackson Hewitt Tax Service Inc. [02-02-43] Compensation ("JTX") (2004-Present); Director, Committee Animal Medical Center (2002-Present); Director, Hotelevision, Inc. Elected for Three (1999-2003); Director and/or Lead Year Term Director Director, Parsons Brinckerhoff, Inc. since February 1993 (1995-Present); Director, Absolute Quality Inc. (2000-Present); Trustee of Excelsior Funds (33) (1994-Present); President, Continuation Investments Group Inc. (1997-2001). Disinterested Directors Class II Directors to serve until Termination of the Trust: Robert F. Birch Director, Member of Director of several investment 5 c/o One Liberty Plaza, the Audit Committee, companies advised by the Advisor or by 165 Broadway 36th Floor, Member of Nominating its affiliates (1998-Present); New York, New York and Compensation Chairman of the Board and Co-Founder, 10006-1404 Committee, Member of The China Business Group, Inc. Executive Committee (1996-Present); Director, Brandywine Age 68 Funds (3) (2001 to Present). [03-12-36] Elected for Three Year Term Director since December 1998 Leo M. Walsh, Jr. Director, Chairman Director of several investment 6 c/o One Liberty Plaza, of the Audit companies advised by the Advisor or by 165 Broadway 36th Floor, Committee, Member of its affiliates (1989-Present); New York, New York Nominating and Financial Consultant for Medco Health 10006-1404 Compensation Solutions Inc. (1994- 2003). Committee Age 72 [09-05-32] Elected for Three Year Term Director since February 1993 Disinterested Director Class III Director to serve until Termination of the Trust: Harry E. Petersen, Jr. Director, Member of Director and/or Trustee of several 3 c/o One Liberty Plaza, the Audit Committee, investment companies advised by the 165 Broadway, 36th Floor, Member of Advisor or by its affiliates New York, New York Compensation and (1993-Present); Senior Consultant to 10006-1404 Nominating Cornerstone Equity Advisors, Inc. Committee, Member of (1998-2001). Age 79 Executive Committee [02-03-25] Elected for Three Year Term Director since February 1993 Interested Director Class III Director to serve until Termination of the Trust: Clifford E. Lai* Director Since President (1998-Present) and Chief 5 c/o One Liberty Plaza, December 9, 2003 Investment Officer (1993-2002) of the 165 Broadway, 36th Floor, Advisor; Co-Chairman (2003-Present) New York, New York President Elected and Board of Managers (1995-Present) 10006-1404 Annually Since 1993 of Hyperion GMAC Capital Advisors, LLC (formerly, Lend Lease Hyperion Age 51 Capital, LLC); President of several [05-16-53] investment companies advised by the Advisor (1993-Present). - ---------- * Interested persons as defined in the Investment Company Act of 1940, as amended, (the "1940 Act") because of affiliations with Hyperion Capital Management, Inc., the Trust's Advisor. - ------------------------------------------------------------------------------------------------------------------- HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Information Concerning Directors and Officers (Unaudited) - ------------------------------------------------------------------------------------------------------------------- Officers of the Trust Name, Address Position(s) Term of Office and Principal Occupation(s) and Age Held with Trust Length of Time Served During Past 5 Years - --------------------------------------------------------------------------- --------------------------------------- Clifford E. Lai* President Elected Annually Since Please see "Information Concerning c/o One Liberty Plaza, April 1993 Nominees/Directors." 165 Broadway, 36th Floor, New York, New York 10006-1404 Age 51 [05-16-53] John Dolan* Vice President Elected Annually Since Chief Investment Strategist (1998- c/o One Liberty Plaza, March 1998 Present) and Chief Investment 165 Broadway, 36th Officer (2002-Present) of the Floor, Advisor. New York, New York 10006-1404 Age 51 [08-19-53] Patricia A. Sloan* Vice President Elected Annually Since Consultant of Ranieri & Co., Inc. c/o One Liberty Plaza, June 2002 (2000-Present); Secretary, Director 165 Broadway, 36th and/or Trustee of several investment Floor, companies advised by the Advisor or New York, New York by its affiliates (1989- 2002). 10006-1404 Age 61 [10-02-43] Daniel S. Kim*(DELTA) Secretary & CCO Elected Chief Compliance Director, General Counsel and Chief c/o One Liberty Plaza, Officer September 2004 Compliance Officer ("CCO") 165 Broadway, 36th and Secretary since (September 2004-Present), and Floor, January 2005 Secretary (since January 2005) of New York, New York the Adviser; Secretary (since 10006-1404 January 2005)and CCO (September 2004-Present) of several investment Age 36 companies advised by the Advisor; [3-13-68] Secretary (since January 2005), General Counsel and CCO (September 2004- Present) Hyperion GMAC Capital Advisors, LLC; Assistant General Counsel and CCO (May 2001-August 2004) Oak Hill Capital Management Inc.; Assistant General Counsel (May 2001-August 2004) of Oak Hill Advisors, LP; Lawyer (January 2001-April 2001) at Arkin, Kaplan & Cohen; Law student (January 2000 to May 2000). Thomas F. Doodian* Treasurer Elected Annually Since Managing Director, Chief Operating c/o One Liberty Plaza, February 1998 Officer (1998- Present) and Director 36th floor, of Finance and Operations of the New York, New York Advisor (1995-Present); Treasurer of 10006-1404 several investment companies advised by the Advisor (1998-Present); Age 45 Treasurer of Hyperion GMAC Capital [[05-22-59] Advisors, LLC (formerly, Lend Lease Hyperion Capital Advisors, LLC) (1996-Present) - ------------ * Interested person as defined in the Investment Company Act of 1940, as amended, (the "1940 Act") because of affiliations with Hyperion Capital Management, Inc., the Trust's Advisor. (DELTA) Joseph Tropeano served as Secretary during the 2004 fiscal year. The Trust's Statement of Additional Information includes additional information about the directors and is available, without charge, upon request by calling 1-800-497-3746.
- ------------------------------------------------------------------------------- DIVIDEND REINVESTMENT PLAN - ------------------------------------------------------------------------------- A Dividend Reinvestment Plan (the "Plan") is available to shareholders of the Trust pursuant to which they may elect to have all distributions of dividends and capital gains automatically reinvested by American Stock Transfer & Trust Company (the "Plan Agent") in additional Trust shares. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, then to the nominee) by the Trust's Custodian, State Street Bank and Trust Company, as Dividend Disbursing Agent. The Plan Agent serves as agent for the shareholders in administering the Plan. After the Trust declares a dividend or determines to make a capital gain distribution, payable in cash, if (1) the market price is lower than net asset value, the participants in the Plan will receive the equivalent in Trust shares valued at the market price determined as of the time of purchase (generally, the payment date of the dividend or distribution); or if (2) the market price of the shares on the payment date of the dividend or distribution is equal to or exceeds their net asset value, participants will be issued Trust shares at the higher of net asset value or 95% of the market price. This discount reflects savings in underwriting and other costs that the Trust otherwise will be required to incur to raise additional capital. If net asset value exceeds the market price of the Trust shares on the payment date or the Trust declares a dividend or other distribution payable only in cash (i.e., if the Board of Directors precludes reinvestment in Trust shares for that purpose), the Plan Agent will, as agent for the participants, receive the cash payment and use it to buy Trust shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. If, before the Plan Agent has completed its purchases, the market price exceeds the net asset value of the Trust's shares, the average per share purchase price paid by the Plan Agent may exceed the net asset value of the Trust's shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Trust. The Trust will not issue shares under the Plan below net asset value. Participants in the Plan may withdraw from the Plan upon written notice to the Plan Agent. When a participant withdraws from the Plan or upon termination of the Plan by the Trust, certificates for whole shares credited to his or her account under the Plan will be issued and a cash payment will be made for any fraction of a share credited to such account. There is no charge to participants for reinvesting dividends or capital gain distributions, except for certain brokerage commissions, as described below. The Plan Agent's fees for handling the reinvestment of dividends and distributions are paid by the Trust. There are no brokerage commissions charged with respect to shares issued directly by the Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent's open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any federal income tax that may be payable on such dividends or distributions. A brochure describing the Plan is available from the Plan Agent, by calling 1-212-936-5100. If you wish to participate in the Plan and your shares are held in your name, you may simply complete and mail the enrollment form in the brochure. If your shares are held in the name of your brokerage firm, bank or other nominee, you should ask them whether or how you can participate in the Plan. Shareholders whose shares are held in the name of a brokerage firm, bank or other nominee and are participating in the Plan may not be able to continue participating in the Plan if they transfer their shares to a different brokerage firm, bank or other nominee, since such shareholders may participate only if permitted by the brokerage firm, bank or other nominee to which their shares are transferred. INVESTMENT ADVISOR AND ADMINISTRATOR TRANSFER AGENT HYPERION CAPITAL MANAGEMENT, INC. AMERICAN STOCK TRANSFER & TRUST COMPANY One Liberty Plaza Investor Relations Department 165 Broadway, 36th Floor 59 Maiden Lane New York, New York 10006-1404 New York, New York 10038 For General Information about the Fund: For Shareholder Services: 1-(800)-HYPERION 1-800-937-5449 SUB-ADMINISTRATOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM STATE STREET CORP. 225 Franklin Street PRICEWATERHOUSECOOPERS LLP Boston, Massachusetts 02116 300 Madison Avenue New York, New York 10017 CUSTODIAN AND FUND ACCOUNTING AGENT STATE STREET CORP. LEGAL COUNSEL 225 Franklin Street Boston, Massachusetts 02116 SULLIVAN & WORCESTER LLP 1666 K Street, Northwest Washington, District of Columbia 20006 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that periodically the Trust may purchase its shares of beneficial interest in the open market at prevailing market prices. Quarterly Portfolio Schedule: The Trust will file Form N-Q with the Securities and Exchange Commission for the first and third quarters of each fiscal year. The Trust's Forms N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov. The Trust's Form N-Q may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Once filed, the most recent Form N-Q will be available without charge, upon request, by calling 1-800-HYPERION or on the Fund's website at http://www.hyperioncapital.com. Proxy Voting Policies and Procedures A description of the policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-800-497-3746 and on the Securities and Exchange Commission's website at http://www.sec.gov. Proxy Voting Record The Trust has filed with the Securities and Exchange Commission its proxy voting record for the 12-month period ending June 30 on Form N-PX. Once filed, the most recent Form N-PX will be available without charge, upon request, by calling 1-800-497-3746 or on the Securities and Exchange Commission's website at http://www.sec.gov. - ------------------------------------------------------------------------------- Officers & Directors - ------------------------------------------------------------------------------- Lewis S. Ranieri Chairman Robert F. Birch* Director Rodman L. Drake* Director Garth Marston Director Emeritus Leo M. Walsh, Jr.* Director Harry E. Petersen, Jr.* Director Clifford E. Lai President Patricia A. Sloan Vice President John Dolan Vice President Thomas F. Doodian Treasurer Daniel S. Kim CCO and Secretary ---------- * Audit Committee Members - ------------------------------------------------------------------------------- [GRAPHIC OMITTED] - ------------------------------------------------------------------------------- This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Trust shares. Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. One Liberty Plaza 165 Broadway, 36th Floor New York, New York 10006-1404 Item 2. Code of Ethics. As of the end of the period covered by this report, the Registrant had adopted a Code of Ethics for Principal Executive and Principal Financial Officers (the "Code"). There were no amendments to or waivers from the Code during the period covered by this report. A copy of the Registrant's Code will be provided upon request to any person without charge by contacting Daniel Kim at 1-800-HYPERION or by writing to Mr. Kim at One Liberty Plaza, 165 Broadway, 36th Floor, New York, NY 10006-1404. Item 3. Audit Committee Financial Expert. The Registrant's Board of Directors has determined that the Registrant has at least one audit committee financial expert serving on its audit committee, and his name is Rodman L. Drake. Mr. Drake is independent. Item 4. Principal Accountant Fees and Services. Audit Fees For the fiscal year ended December 31, 2004, PriceWaterhouseCoopers LLP ("PwC") billed the Registrant aggregate fees of $105,000 for professional services rendered for the audit of the Registrant's annual financial statements and review of financial statements included in the Registrant's annual report to shareholders and included in the Registrant's semi-annual report to shareholders. For the fiscal year ended December 31, 2003, PwC billed the Registrant aggregate fees of $96,000 for professional services rendered for the audit of the Registrant's annual financial statements and review of financial statements included in the Registrant's annual report to shareholders and included in the Registrant's semi-annual report to shareholders. Tax Fees For the fiscal year ended December 31, 2004, PwC billed the Registrant aggregate fees of $8,500 for professional services rendered for tax compliance, tax advice and tax planning. The nature of the services comprising the Tax Fees was the review of the Registrant's income tax returns and tax distribution requirements. For the fiscal year ended December 31, 2003, PwC billed the Registrant aggregate fees of $7,000 for professional services rendered for tax compliance, tax advice and tax planning. The nature of the services comprising the Tax Fees was the review of the Registrant's income tax returns and tax distribution requirements. All Other Fees for 2004 and 2003 None. Audit-Related Fees for 2004 and 2003 None. Item 5. Audit Committee of Listed Registrants. The Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Registrant's Audit Committee members include Leo M. Walsh, Jr., Rodman L. Drake, Robert F. Birch and Harry E. Petersen, Jr. Item 6. Schedule of Investments. Please refer to Item 1. Reports to Shareholders. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. POLICIES AND PROCEDURES FOR VOTING PROXIES 1. Purpose. The purpose of this document is to describe the policies and procedures for voting proxies received from issuers whose securities are held by the Funds. These policies and procedures are to be implemented by the investment adviser or sub-adviser, if any, (the "Adviser") to the Funds. 2. Definition of Proxy. A proxy permits a shareholder to vote without being present at annual or special meetings. A proxy is the form whereby a person who is eligible to vote on corporate matters transmits written instructions for voting or transfers the right to vote to another person in place of the eligible voter. 3. Policy for Voting Proxies. (a) Fiduciary Considerations. Proxies are voted solely in the interests of the shareholders of the Funds. Any conflict of interest must be resolved in the way that will most benefit the shareholders. (b) Management Recommendations. Because the quality and depth of management is a primary factor considered when investing in a company, the recommendation of management on any issue should normally be given substantial weight. The vote with respect to most routine issues presented in proxy statements should be cast in accordance with the position of the company's management, unless it is determined that supporting management's position would adversely affect the investment merits of owning the stock. However, each issue should be considered on its own merits, and the position of the company's management should not be supported in any situation where it is found not to be in the best interests of the Funds' shareholders. 4. Conflicts of Interest. The Funds recognize that under certain circumstances their Adviser may have a conflict of interest in voting proxies on behalf of the Funds. Such circumstances may include, but are not limited to, situations where the Adviser or one or more of its affiliates, including officers, directors and employees, has or is seeking a client relationship with the issuer of the security that is the subject of the proxy vote. The Adviser shall periodically inform its employees that they are under an obligation to be aware of the potential for conflicts of interest on the part of the Adviser with respect to voting proxies on behalf of Funds, both as a result of the employee's personal relationships and due to circumstances that may arise during the conduct of the Adviser's business, and to bring conflicts of interest of which they become aware to the attention of the proxy manager (see below). The Adviser shall not vote proxies relating to such issuers on behalf of its client accounts until it has determined that the conflict of interest is not material or a method of resolving such conflict of interest has been agreed upon by the Board of Directors for the Fund. A conflict of interest will be considered material to the extent that it is determined that such conflict has the potential to influence the Adviser's decision-making in voting a proxy. Materiality determinations will be based upon an assessment of the particular facts and circumstances. If the proxy manager determines that a conflict of interest is not material, the Adviser may vote proxies notwithstanding the existence of a conflict. If the conflict of interest is determined to be material, the conflict shall be disclosed to the Board of Directors and the Adviser shall follow the instructions of the Board of Directors. The proxy manager shall keep a record of all materiality decisions and report them to the Board of Directors on a quarterly basis. 5. Routine Proposals. Proxies for routine proposals (such as election of directors, selection of independent public accountants, stock splits and increases in capital stock) should generally be voted in favor of management. 6. Non-routine Proposals. (a) Guidelines on Anti-takeover Issues. Because anti-takeover proposals generally reduce shareholders' rights, the vote with respect to these proposals should generally be "against." During review of the proposal, if it is concluded that the proposal is beneficial to shareholders, a vote for the proposal should be cast. (b) Guidelines on Social and Political Issues. Social and political issues should be reviewed on a case by case basis. Votes should generally be cast with management on social or political issues, subject to review by the proxy manager. 7. Proxy Manager Approval. Votes on non-routine matters (including the matters in paragraph 6 and mergers, stock option and other compensation plans) and votes against a management's recommendations are subject to approval by the proxy manager. The chief investment officer or his delegatee shall be the proxy manager. 8. Proxy Voting Procedures. Proxy voting will be conducted in compliance with the policies and practices described in this memorandum and is subject to the proxy manager's supervision. A reasonable effort should be made to obtain proxy material and to vote in a timely fashion. Records should be maintained regarding the voting of proxies under these policies and procedures. 9. Report to the Board. On a quarterly basis, the proxy manager or his designee will report in writing to the Boards of Directors on the general manner in which proxy proposals relating to anti-takeover, social and political issues were voted, as well as proposals that were voted in opposition to management's recommendations. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers None. Item 10. Submission of Matters to a Vote of Security Holders. None. Item 11. Controls and Procedures. The Registrant's principal executive officer and principal financial officer have concluded that the Registrant's Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-CSR. Item 12. Exhibits. (a)(1) None. (2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR. (3) None. (b) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(b) under the Investment Company Act of 1940 is attached as an exhibit to this Form N-CSR. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. By: /s/ Clifford E. Lai __________________ Clifford E. Lai Principal Executive Officer Date: March 8, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Clifford E. Lai ___________________ Clifford E. Lai Principal Executive Officer Date: March 8, 2005 By: /s/ Thomas F. Doodian _____________________ Thomas F. Doodian Treasurer and Principal Financial Officer Date: March 8, 2005 EX-99 2 ex99.txt EX-99.CERT CERTIFICATION I, Clifford E. Lai, certify that: 1. I have reviewed this report on Form N-CSR of HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: March 8, 2005 /s/ Clifford E. Lai _____________________ Clifford E. Lai Principal Executive Officer CERTIFICATION I, Thomas F. Doodian, certify that: 1. I have reviewed this report on Form N-CSR of HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: March 8, 2005 /s/ Thomas F. Doodian ________________________ Thomas F. Doodian Treasurer and Principal Financial Officer EX-99.906 3 ex906.txt EX-99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT Clifford E. Lai, Principal Executive Officer, and Thomas F. Doodian, Principal Financial Officer, of HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. (the "Fund"), each certify as evidenced below that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: March 8, 2005 /s/ Clifford E. Lai _______________________________________ Clifford E. Lai President and Principal Executive Officer HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. Dated: March 8, 2005 /s/ Thomas F. Doodian _______________________________________ Thomas F. Doodian Treasurer and Principal Financial Officer HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. and will be retained by HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----